The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (MEES regulations) apply to all commercial rented properties. The regulations were implemented on 1st April 2018 and since that date Landlords have been prohibited from granting, renewing or extending a lease on a building that does not meet with the minimum energy efficiency standard of E, unless they can show that the regulations do not apply or they hold a valid exemption.

Changes from 1 April 2023

From 1 April 2023 it will be unlawful for a landlord to ‘continue to let’ a building (which may have been lawfully granted prior to 1st April 2018) with a minimum energy efficiency standard below E. Failure to comply will not affect the validity of the lease but landlords will be liable to civil penalties of up to £150,000.

The regulations apply to all types of tenancies except where

the property is not legally required to have an EPC, is let on a short tenancy for a term under 6 months (unless the tenant has already occupied for over 12 months or the term can be extended) or the property is let on a very long tenancy (for a term of 99 years or more).

Exemptions

There are potential exemptions to the MEES Regulations as follows, but conditions must be satisfied and the exemption must be registered on the PRS Exemptions Register.

No further improvements: All cost effective improvements have been made or there are none that can be made.

Devaluation: the landlord has obtained a

report from an independent surveyor which states that making the relevant energy efficiency improvement would result in a reduction of more than 5% in the market value of the building.

Consent: the landlord has been unable to increase the EPC rating to the minimum level of energy efficiency or better because a third party, whose consent, permission or approval is needed for a proposed energy efficiency improvement has refused that consent, despite reasonable efforts by the landlord, including the tenant, any superior landlord, a planning authority or a lender.

6 month exemption: an exemption can be registered by a landlord who purchases a building that does not meet the required EPC rating in order for them to carry out the necessary works.

Implications

The usual statutory compliance provisions in a lease do not require the tenant to carry out works to upgrade the property or undertake works to improve energy performance, but it remains to be seen how this will be tested in the future. In addition, whether the landlord can attempt to recover such costs via a service charge will depend on the drafting of the lease, and landlords may now seek to specifically include such rights going forward.